Features - OCC Commodity Focus

Ask any recycler who handles recovered fiber what market conditions were like in 2019, and industry veterans and newcomers alike will report that it was one of the worst years.

Recyclers anticipated that recovered fiber prices would likely decline in 2019, but few expected they would sink as low as they did. In 2019, the average U.S. price for mixed paper sank to $0 per ton and remained there most of the year. Even more surprising was the dip in old corrugated containers (OCC) pricing. OCC started 2019 at an average domestic price of $70 per ton in January and steadily declined to $25 per ton by July, and the U.S. average price hovered in that range for the remainder of the year.

Many recyclers have said it was tough moving recovered fiber in 2019.

“There wasn’t a commodity out there that was healthy in 2019,” says Melanie Harman, who is executive vice president of sales and marketing for Duluth, Georgia- based Recycling Management Resources. “2019 was the worst year I have seen in my existence in this industry—it was really, really rough for a lot of players. Historically, you see one grade prop up another—if things are bad on brown grades, the high-grade side tends to be stable. But this time, there was none of that. There was no good news at any level,” she adds.

Industry analysts and recyclers say they anticipate things might start to improve this year—at least for OCC and some high grades of recovered fiber. According to the Feb. 5 issue of Fastmarkets RISI’s PPI Pulp & Paper Week, OCC inched up to an average domestic price of $32 per ton for the February buying period.

Recyclers and brokers in most parts of the U.S. say they are no longer struggling to move OCC tons. Although conditions are starting to look a little brighter, recyclers and brokers express that challenges likely will persist for OCC in the first half of the year.

“I think 2020 will continue to be a bit of a rough year,” a broker on the East Coast says. “We’ve started off better with corrugated, but I think it’s a challenging environment on the processing side of the business with these prices.”

“I don’t think movement is bad,” adds Johnny Gold, president of The Gold Group Recycling Consultants LLC based in Swampscott, Massachusetts. “Is it great? No. But things are moving. In recent weeks, there seems to be some demand where premiums are being paid.”

Opportunities for OCC

Increased demand for recovered fiber, some of which came from China, has pushed prices up slightly in the first quarter of 2020. By the first week of February, China’s Ministry of Ecology and Environment had issued its third round of import permits, allowing for an additional 22,750 metric tons of recovered paper. As of early February, China had approved 3.21 million metric tons of recovered paper imports so far this year, which is a 42 percent decline compared with the 5.53 million metric tons allocated in the first three batches of permits in 2019.

Debbie Jones, director of equity research at Deutsche Bank who is based out of New York, says the quotas China has released for recovered fiber so far this year amount to roughly half of that nation’s expected total permitted recovered paper imports for all of 2020. Industry experts estimate that China will import only 6 million to 7 million tons of recovered paper in total this year.

In the first quarter of 2020, the coronavirus halted China’s domestic recovered paper collection, increasing that nation’s demand for exports. Jones says she thinks this contributed to the higher U.S. OCC prices in January and February.

Key takeaways

Increased demand for recovered fiber has pushed prices up slightly in the first quarter of 2020.

Mills in India, Mexico and the Pacific Northwest have demanded more OCC in the first two months of the year.

U.S. containerboard producers are taking downtime in the first quarter of 2020, and it is uncertain how this will affect demand for OCC later in the year.

“It’s unclear, however, how the coronavirus will impact markets going forward, but we obviously wouldn’t expect that to be positive,” she says.

Demand for OCC has been stronger in nations that have restrictions on mixed paper imports. Several industry sources say Indian mills were increasing import orders for OCC and sorted office paper (SOP) in the first few weeks of 2020 as a result of that country’s restrictions on mixed paper imports.

“People stopped shipping mixed to India because of the fear of rejections and claims and sending containers back,” the broker on the East Coast says. “Because of the mixed paper situation in India, Indian mills have had to go out and buy other grades of fiber, including corrugated. That buoyed movement and price a little.

“Right now, compared to what we had seen in the last 12 months, pricing and movement has been significantly better,” the broker says of export conditions for OCC in general.

“There is some capacity on the horizon” in Mexico, adds a broker who is based in the South. He says exports to Mexico have been healthy for the first few months of 2020, adding that Grupo Gondi, Monterrey, Mexico, has announced plans to add capacity to consume OCC this year.

Domestic markets for OCC are stable in most parts of the U.S., and prices are better than in 2019, according to sources. However, some mills have taken downtime in the first two months of the year.

Jones adds that many U.S.-based containerboard producers are taking downtime, which could affect demand after China scales back its orders of OCC.

OCC pricing*

Feb. 2020

$32

Nov. 2019

$22

Feb. 2019

$56

Nov. 2018

$71

*Average U.S. dollars per short ton for open market purchases by mills for delivery as reported by Fastmarkets RISI’s PPI Pulp & Paper Week reports.

“The level of maintenance taken by containerboard producers in the first half of 2020 is much higher than we have seen in some time,” she says. “This should help tighten the market for containerboard but could also mean reduced demand for virgin and recycled fiber.”

She adds that domestic producers’ box shipments were flat in the fourth quarter of 2019 and that only modest improvement is expected in 2020.

“By and large, [domestic] mills aren’t looking for additional tons,” the broker in the South adds. “We see mill groups downsizing their personnel. But as far as distress, things aren’t as distressed in the region to a point where they can’t move. I think recyclers have adjusted their buying and are in tune with supply and demand. So, things are a little healthier than when we were all shocked with 25-year lows.”

Never enough OCC for mills in the Northwest

Domestic OCC markets are starting to even out in most parts of the U.S., but demand is almost booming among mill buyers in the Pacific Northwest. In the fall of 2019, a national broker described the domestic market in that region as “solid” and said “it’s just going to get that much stronger” in 2020.

Companies also have been adding capacity to consume recovered fiber in this region. Port Townsend Paper Corp. made upgrades to its mill in Port Townsend, Washington, to consume OCC last year. In 2019, NORPAC also announced it would consume more than 400,000 metric tons of OCC and mixed paper combined per year. Mexico-based Bio Pappel’s McKinley Paper Co. also restarted its mill in Port Angeles, Washington, in the beginning of the year. In the future, Packaging Corp. of America plans to add 350,000 tons per year of OCC pulping capacity at its mill in Wallula, Washington.

“There have been a lot of announced capacity expansions in the Northwest,” says Jay Simmons, product development manager at NORPAC. “Port Townsend’s mill expanded. The Port Angeles mill. [The Packaging Corp. of America] mill in Wallula, Washington, is slated to use OCC. Almost everyone that’s expanding is expanding with OCC.”

Simmons adds that NORPAC is growing its business in the packaging sector, which prompted the need for it to consume more OCC and mixed paper. As of the first quarter of 2020, he says NORPAC’s mill is at full capacity, but he says the company plans to continue to grow and could require more recovered fiber in the future.

Overall, recyclers in this region have had an easier time moving OCC than those in other regions of the U.S. As of mid-February, a recycler in the Pacific Northwest says mills in the area “can’t get enough” OCC.

“Things seem kind of healthy [for OCC] and it’s nice to be healthy again, but that doesn’t mean things will be volatile and go up quickly.” – Melanie Harman, executive vice president of sales and marketing, Recycling Management Resources

“We haven’t had an OCC movement issue,” she says. “There are so many mills here and more coming on, so everything flows. If anything, we’ve had more people come to us asking for additional tonnage that we don’t have. There are almost too many cooks in the kitchen—but for us that’s great.”

With even more capacity expected to come online among mills in the region, she adds that competition for OCC likely will increase in the future, which could help drive up prices for that grade.

She says some northern California recyclers also benefit from the demand in the Pacific Northwest, but any recyclers farther south in that state have a tough time taking advantage of that growing demand because of freight costs.

“It does not make sense for us to ship to the Pacific Northwest because of high freight costs,” a California-based recycler confirms. “Most of the paper mills in the Pacific Northwest receive enough OCC supplies from local recyclers in the area.”

Healthy … for now

While domestic and export markets for OCC have experienced slight improvements in the first quarter of 2020, few recyclers and brokers are optimistic that conditions will improve dramatically in the near-term future.

“There’s so much uncertainty,” says a broker in the Southeast, adding that India’s crackdown on the quality of recovered fiber imports seemed to catch the industry by surprise at the start of this year. “We’re in the middle of the unknown right now,” he says of India.

The recycler based in California adds, “It’s hard to predict what will happen in the next few weeks and months because of various factors” such as the coronavirus outbreak in China and geopolitical factors that affect recovered fiber trade.

A recycler in the Southwest who has been in the industry several decades says market conditions are “certainly difficult to predict.” However, he adds, “I doubt we’ll go a whole year with prices at this level. I don’t see prices [for OCC] getting more negative.”

Harman says she plans to remain cautiously optimistic about prospects for OCC in the first half of 2020.

“Things seem kind of healthy [for OCC] and it’s nice to be healthy again, but that doesn’t mean things will be volatile and go up quickly,” she says. “I also don’t like increases that happen so quickly because typically anything that goes up quick will go down fast. I would say I’m eager for a steady period of ‘let’s be healthy.’”

The author is managing editor of Recycling Today and can be contacted at msmalley@gie.net.

The management team at GLE Scrap Metal, with corporate headquarters in Warren, Michigan, and Longwood, Florida, has taken this adage to heart. The company evolved out of Great Lakes Electronics Corp., which Nathan Zack, then a 20-year-old a high school dropout, founded in his parents’ garage in Farmington Hills, Michigan, in 2000. After his cousin Danny Zack joined him in the business in 2005, the duo diversified into scrap metal recycling, forming GLE Scrap Metal. Over the years, the company has expanded organically and through acquisition from a retail scrap operation to a scrap processor, wholesaler and broker. GLE’s management team credits that growth in part to treating its customers with respect and to offering a level of transparency that can be lacking with some other companies.

“We know what it is like to be on all sides of a deal, and we subscribe to the Golden Rule—treat people how you want to be treated,” says Daniel Poris, GLE’s vice president of nonferrous. “We want to enjoy working with our customers and suppliers and be successful together.”

Geographically and operationally diversified

GLE and its sister companies operate eight facilities that are divided between Michigan and Florida and that employ nearly 200 people. Its most recent expansions involved establishing a stand-alone corporate office in Longwood that houses GLE’s executive, administrative, logistics and trading and purchasing teams. In 2018, GLE established a dedicated 60,000-square-foot wire chopping operation on 30 acres in Ocoee, Florida, that features a large volume MTB processing line that was supplied by Wendt Corp., Buffalo, New York.

Locations: GLE’s corporate offices are in Longwood, Florida, and Warren, Michigan. The company’s Michigan operations include its Responsible Recycling certified electronics recycling facility, Great Lakes Electronics Recycling Corp., in Sterling Heights; a nonferrous facility in Warren; and a ferrous yard in Melvindale. In Florida, GLE operates ferrous and nonferrous yards in Holly Hill, a nonferrous facility in Opa-Locka and a wire chopping facility in Ocoee.

“The wire processing facility has consistently grown in reach and volume since we began buying in 2018,” Poris says, adding that the company purchases material from throughout the U.S. “We are operating two shifts a day, six days a week.”

He says GLE’s Florida operations in Holly Hill, Casselberry and Opa-Locka are “heavily nonferrous with a product mix that skews toward postconsumer scrap and industrial production.” The company buys material from throughout the Southeast.

In Michigan, GLE’s Warren operation features a 100,000-square-foot warehouse and processes nonferrous scrap from industrial, wholesale and retail customers. It also is home to GLE’s Michigan corporate offices.

GLE’s Michigan operations source material from throughout the Midwest and the Atlantic Coast, Poris says.

How did a company that originated in Michigan end up operating in Florida?

Co-founder Danny, who also serves as CEO, says he and Nathan wanted to diversify beyond electronics recycling and were interested in learning about the nonferrous sector. The opportunity arose to acquire an operation in Florida from a veteran who wanted to exit the business. The cousins’ uncle, who operated a scrap yard in Florida, helped make the connection.

Danny says he and Nathan learned a great deal from their uncle, who taught them the industry.

From processing to brokerage

Nonferrous accounts for the bulk of GLE’s business. However, the company’s breadth of services and processing capabilities offer advantages, Poris says. “We have the unique and strong opportunity where we can walk in anywhere and find some way to work with them.”

Part of GLE’s strength lies in its commitment to serving its customers. “We are never not going to be in the market,” Danny says. “You may not always love our price, but we will always have one, and we are here to service you.”

GLE’s goal is to get the best results for its suppliers, he says, by maximizing their returns. In some cases, that may mean brokering materials through GLE Scrap Metal Trading, the brokerage business that was formed in 2013, as is. In other cases, GLE may further process it.

GLE Scrap Metal Trading purchases several hundred containers of copper and brass-bearing items, primarily, Poris says. This material and the scrap GLE processes are sold domestically and internationally, including to customers in Asia, Europe and South America.

Friends in business

Daniel Poris, vice president of nonferrous at GLE Scrap Metal, with operations in Michigan and Florida, says the company owes its success in part to its management team. “Our team is a mix of the old-school scrap dealer mentality with the new-school technology and attitude. We are data-driven in our decisions and transparent in our execution.”

He says the company’s team and the relationships they have with suppliers and consumers contribute to GLE’s success, so the company continually invests in them and empowers them to make decisions quickly.

“We love the challenge of a complicated or distressed situation and are built to take advantage when others move more slowly,” Poris adds.

GLE fosters an entrepreneurial work environment, he says, and employees with that type of mindset tend to excel with the company.

Its management team largely grew up together in the same community outside of Detroit, having attended the same high school. “We have a very tight-knit team that enjoys working together and each other’s company,” Poris says. “Professionally, we love working on difficult problems and developing solutions that will give us an edge in the future.”

“With GLE Scrap Metal Trading, we focus on relationship-based purchasing and try to not be everything to all people,” he says. “We try to avoid situations where someone will walk away unhappy. With an excellent team, we try to communicate clearly and manage expectations through the whole trading process.”

“We want what is best for everyone,” Danny says. “If you don’t find that, you are not going to succeed.”

Poris says GLE strives for transparency with suppliers to its wire chopping operation. “We believe very strongly in relationships, service, transparency and always paying our bills on time,” Poris says. “Nothing replaces a strong personal relationship between consumers and suppliers, but relationships only last when all parties’ expectations are met.”

GLE’s transparency comes in part from software and reporting systems that the company has developed. Poris says these systems “take the guesswork out of receiving reports and recoveries for wire chopper loads.”

He adds, “Our customers give us consistently good feedback on recoveries, settlements and quick payments.”

GLE also operates a lab to assay outputs through its wire chopper. Poris says this helps to give consuming customers confidence in the company’s material. “Many systems have been developed to manage both inputs and outputs to consistently produce high-quality materials.”

Danny says GLE strives to supply the right chemistries to the right users, with Poris adding that the company seeks to understand its customers’ needs and how GLE’s supply chain fits into them.

Growing in challenging times

Poris describes the last year as having been “difficult.” Despite that, GLE saw success by growing its processing and trading capabilities, he says.

“One of the greatest issues related to the supply-demand picture of red metals has been uncertainty regarding China’s quota and scrap categorization system,” Poris says as of mid-January. “There has been very little predictability and little notice when things change.”

GLE Scrap Metal’s corporate offices in Longwood, Florida

The Chinese government provided more clarity on the matter later that month when its State Administration for Market Regulation published documents providing details on proposed new nonferrous scrap specifications.

The proposed changes, which are scheduled to take effect July 1, would allow some grades of red metal and aluminum scrap to be imported under a “raw materials” rather than a “waste” classification and would eliminate quotas.

China’s scrap import quota system as well as tariffs on copper and aluminum scrap shipments from the U.S. have led to a shift in GLE’s consumer base. Poris says GLE has “managed this shift well, and it has opened many opportunities and made us stronger.”

GLE has seen success despite the difficult last year by being strict on payment terms and credit insurance. Poris says this helps the company “avoid problems in inevitable market corrections.”

Taking more control

“We would like to pursue further processing of our own material to be more in control of our own destiny and less reliant on other processors,” he says. “With continued investments in our existing facilities, we want our suppliers to have excellent service experiences and be long-term partners. Our success depends on the quality of our customers and the strength of our relationships.”

Regarding investing in the business, Danny adds, “Timing is important. Timing is everything. When the time is right, we’ll be there.”

The author is editor of Recycling Today and can be contacted at dtoto@gie.net.

Custom Content - Custom Content | US Conveyor

In 2018 Metalico set out to significantly upgrade its nonferrous processing capabilities at its Buffalo, New York, shredding facility. Joe McGough, VP of Engineering & Shredder Operations for Metalico, says, “Market conditions had changed, and we needed to change the metal packages we were making. It required us to invest in a new plant.”

Following a comprehensive tendering process for the 45 tons-per-hour plant that would produce zorba, zurik and insulated copper wire (ICW), Metalico selected SGM Magnetics to supply the plant. SGM in turn partnered with U.S. Conveyor to supply the conveyors, structural work and mezzanines.

“In going through the process, we were introduced to U.S. Conveyor’s Modular Hybrid Conveyors,” McGough says. “I was impressed with what I learned and saw. These things are extremely well engineered, and everything was top-shelf. They were not the cheapest option, but they were certainly the best.”

He adds, “Years of experience has taught me that anyone can put a nice paint job on conveyors, and they look great. Trouble is, six months later in this severe-duty application, they begin failing. These units had PPI rollers, SKL bearings, Dodge motors and gear boxes. We knew they would last, and that’s been the case.”

Plant changes made easy

Since 2018, Metalico has made several modifications to its plant. “We’ve added some equipment and reconfigured the plant to meet changing market demands,” says McGough.

“What’s outstanding about the modular configuration of these conveyors is you just take them apart and put them back together. It’s literally unbolting, reconfiguring and re-bolting. No need for journeyman welders to cut the system and then try to get it back together,” he adds.

“When we installed the plant, I’m not sure we fully appreciated the time and money we’d save each time we made a change. The modular conveyor design has made making tweaks or major adaptations much easier.”

Engineered for success

U.S. Conveyor’s Modular Hybrid Conveyors incorporate the benefits of a troughing conveyor and combine them with the benefits of a fully sealed slider pan conveyor. They have a flat roller carriage that carries most of the payload with sealed side skirts on the edges of the belt.

The bottom edge of the belt slides along an angled abrasion-resistant (AR) wear plate to aid in sealing the bottom edge of the belt. The skirting material in contact with the belt is replaceable, high-wear UHMW (ultra-high molecular weight polymer). Safety pull cords, nip guards and tail covers are included below 7 feet or when conveyors are in arm’s reach.

The units are available in straight, banana-bend and z-bend configurations.

“U.S. Conveyor uses first-rate components and have very high-quality fabrication,” states McGough. “They cost a little more upfront, but they deliver loads of value and cost a lot less in the end. They are straightforward, honest guys to deal with,” McGough concludes.

The legislation aims to require big corporations to take responsibility for their pollution, requiring producers of plastic products to design, manage and finance waste and recycling programs. In addition, it aims to spur innovation, incentivizing big corporations to make reusable products and items that can be recycled. It also would create a nationwide beverage container refund program and spur investment in domestic recycling efforts.

“The title of this bill suggests it is more interested in garnering headlines than it is in finding solutions,” Tony Radoszewski, president and CEO of Plastics, says. “Plastics only account for 13 percent of municipal solid waste in the U.S. Any effort to specifically target plastic materials—that after life-cycle analysis, prove to be more environmentally desirable than other materials—would be misguided at best and harmful at worst.”

However, Sarah Pierpont, executive director of the New Mexico Recycling Coalition, says that association is supporting the federal legislation introduced by Udall and Lowenthal. She adds that the proposed legislation would create a “huge shift in how we manage plastic production, disposal, recycling and accountability” in the United States.

Dallas-Fort Worth receives investments from Every Bottle Back initiative

The American Beverage Association (ABA), Washington, has announced that the Dallas-Fort Worth Metroplex will be the first region to receive an investment through its Every Bottle Back initiative designed to increase the collection of plastic bottles for recycling.

Launched in October 2019, Every Bottle Back is a coalition of ABA members—the Coca-Cola Co., Keurig Dr Pepper and PepsiCo—along with Switzerland-based World Wildlife Fund, New York-based Closed Loop Partners and Falls Church, Virginia-based The Recycling Partnership. These groups say they have come together to support the circular economy by reinforcing to consumers the value of 100-percent-recyclable plastic bottles and caps and by ensuring these materials don’t end up as waste in oceans, rivers or landfills.

Every Bottle Back will invest in collection, recycling and processing systems in the Dallas-Fort Worth area, according to the ABA.

“Our plastic bottles are made to be remade, and we are excited to work alongside communities in Dallas-Fort Worth to bolster recycling and demonstrate how innovative solutions can make a real difference for future generations,” says Katherine Lugar, president and CEO of the ABA.

Every Bottle Back will invest about $2 million into Austin, Texas-based Balcones Resources’ material recovery facility (MRF) near Dallas to add optical sorters, artificial intelligence and robotics to separate recyclable plastics. The MRF also will add new belt configurations to improve processing of recyclables.

The Every Bottle Back initiative also plans to work with multifamily housing complexes in the Dallas Metroplex, where about 50,000 residents will benefit from expanded recycling access, the ABA reports.

Additionally, the initiative says it will invest in the city of Fort Worth, where it will provide cart-to-cart outreach and best-in-class educational materials on how to recycle to reduce recycling contamination.

Every Bottle Back plans to work with the North Central Texas Council of Governments to share a public service campaign called “Know What to Throw” to educate residents across 230 communities on how to decrease contamination of recyclables.

Overall, the ABA says roughly $3 million will be invested in the Dallas-Fort Worth Metroplex as part of the Every Bottle Back initiative.

Rick Perez, CEO of AI

Avangard Innovative to supply Dow with PCR pellets

Midland, Michigan-based Dow Chemical Co. says it has signed an exclusive supply agreement with Houston-based Avangard Innovative LP (AI). Under the agreement, AI will supply postconsumer resin (PCR) made from film the company recovers and reprocesses. Dow says this is a significant addition to its plastic circularity portfolio that is aligned with the company’s goal to advance the circular economy for plastics and minimize waste in the environment.

The companies say they expect to begin offering Dow’s first-ever PCR-based linear low-density polyethylene (LLDPE) and low-density polyethylene (LDPE) products later this year to North American customers that demand stronger sustainability profiles in targeted applications, such as liners, shrink wrap and protective packaging, among others.

In a conference call to announce the agreement, representatives from the companies declined to provide specifics on the total volume of PCR AI will supply Dow.

The supply agreement follows AI’s announcement that it is expanding its film collection and sortation business, which will be facilitated by adding a second plant in Waller, Texas, and additional new plants in Nevada and Mexico.

Jon Stephens, chief operating officer at AI, said in the conference call that the new plant in Waller will produce 100 million pounds of PCR from film annually, which is double the capacity of the company’s existing plant in Houston.

In the conference call, Julie Zaniewski, sustainability director for Dow’s North American Packaging & Specialty Plastics business, said, “We’re aiming at having a significant supply and more importantly a high-quality supply” of PCR through the partnership.

Metals

Departments - Newsworthy

Levitated Metals starts construction on aluminum recovery plant

Levitated Metals, a new company founded by President Ronak Shah, held a groundbreaking ceremony Jan. 15 to mark the start of construction of its heavy media flotation plant in New Caney, Texas, in the East Montgomery County Industrial Park about 35 miles northeast of Houston.

Shah most recently worked with Alter Trading Corp., St. Louis, as vice president of strategy and technology, a position he held for roughly six years. Prior to that, he was Alter’s senior director of operations strategy. Shah also worked for Portland, Oregon-based Schnitzer Steel Industries as director of continuous improvement.

He says he has been planning Levitated’s heavy media plant, which represents an investment of nearly $10 million, since May of last year. “It’s taken a lot of work to get where we are now.”

Levitated Metals breaks ground on the site of its new nonferrous separation plant in New Caney, Texas.

The company will source zorba from auto shredder operators in the South, separating the aluminum from the copper, brass, zinc, magnesium, stainless steel and other metals using an advanced flotation process. Shah says the plant will produce 10 million pounds per month when operating at full scale.

“Zorba will be our primary feedstock and what the business model is primarily driven on,” Shah says, adding that the company also will purchase zorba fines and zurik within a 500-mile radius of the plant.

“Recycled aluminum is a key step in the automotive supply chain,” he says. “The aluminum block engine of an end-of-life 2007 Ford Taurus has a very similar chemistry to that of a 2020 Chevrolet Silverado. Customers reduce waste, save energy costs and are more efficient purchasing clean aluminum feedstock from Levitated Metals instead of other substitutes.”

Shah says the company’s 10-acre facility will begin production operations in September. The recovered metal packages of twitch (aluminum) and zebra (a mixture of brass, copper, zinc, nonmagnetic stainless steel and copper wire) will be marketed to smelters and processors in the U.S., Mexico and overseas, the company says.

“Texas, the Southeast United States and northern Mexico are home to dozens of melt operations,” Shah says. “Levitated Metals is excited to be a valued supplier to them. My belief is that a large portion of aluminum will go to Mexico and the vibrant and large casting industry in the northern part of that country. I am also excited to sell into the Southeast U.S., which is home to a large number of smelters.

“Some aluminum and a large portion of the heavies will absolutely go overseas,” he continues.

Levitated does not yet have supply agreements in place but is in the early stages of establishing supply and consumer relationships, Shah says.

The company opted for heavy media separation over X-ray or sensor-based sorting, he says, because the process can make a very clean aluminum casting product by extracting more of the magnesium.

Shah says he selected the greater Houston area for the plant because of its proximity to supply and demand, its busy container port and strong manufacturing workforce. Interstate Highway 10, I-45 and I-69 are main thoroughfares for aluminum shipments into the Southeast U.S. Additionally, he says, Levitated is hoping to take advantage of backhaul opportunities into Mexico.

The company will be hiring for marketing and operations positions in the first quarter, Shah says.

Nucor reports slimmer Q4 profits

Charlotte, North Carolina-based Nucor Corp. has announced consolidated net earnings of nearly $108 million in the fourth quarter of 2019 and an annual net earnings figure of $1.27 billion. That compares with net earnings of $275 million in the fourth quarter of 2018 and what was a record $2.36 billion in net earnings for all of 2018.

Leon Topalian, Nucor president and CEO, describes the numbers as “higher actual fourth-quarter earnings than we indicated in our mid-December quantitative guidance.” The CEO points to “stronger than expected steel mill segment performance in December [as] the primary driver” for the final results.

“We believe that the inventory destocking that occurred throughout most of 2019 concluded in the fourth quarter, when customers resumed more normal buying patterns,” Topalian adds in remarks accompanying the results.

The scrap-fed electric arc furnace (EAF) steelmaker says it paid less for ferrous scrap infeed on average in both the fourth quarter and all of 2019 compared with 2018. “The average scrap and scrap substitute cost per gross ton used in the fourth quarter of 2019 was $275, an 8 percent decrease compared to $299 in the third quarter of 2019 and a decrease of 23 percent compared to $359 in the fourth quarter of 2018,” the steelmaker writes. “The average scrap and scrap substitute cost per gross ton used for the full year 2019 was $314, a decrease of 13 percent from $361 for the full year 2018.”

Positive factors Topalian cites include “general business conditions [that] improved in the fourth quarter due to a number of factors, including a rate cut by the Federal Reserve, the new labor agreement between the United Automobile Workers and GM and definitive progress on the trade front.” In looking ahead to 2020, Topalian comments, “We are encouraged by recent economic trends and confident that our positive momentum will continue in 2020.”

The company does not mention its David J. Joseph Co. scrap recycling subsidiary in remarks about its raw materials operations, noting instead that losses in the division “significantly increased in the fourth quarter of 2019” because of the “impact of our Louisiana DRI (direct reduced iron) plant’s planned outage, which was completed in mid-November.”

Nucor also took a write-off or impairment charge “related to one of our fields of proved producing natural gas well assets” and points to “further margin compression throughout our raw materials businesses” as a factor in the fourth quarter.

Steel Dynamics has profitable 2019 but not at 2018’s pace

Fort Wayne, Indiana-based Steel Dynamics Inc. (SDI) has reported net sales of $10.5 billion and net income of $671 million in 2019, recording a profitable year but not at the record-shattering level of 2018.

The electric arc furnace (EAF) steelmaker says it shipped out 10.8 million tons of steel in 2019 and calls its operating income of $987 million and net income of $671 million SDI’s “third-best performance” in company history.

In a news release accompanying its annual and fourth-quarter results, SDI says its lower earnings in the fourth quarter of 2019 resulted in part “from two planned annual maintenance outages” at the company’s Butler, Indiana, and Columbus, Indiana, flat-roll divisions.

The company cites low ferrous scrap prices in the fourth quarter of 2019 and throughout the year as being pertinent to its steelmaking costs and its recycling division’s performance.

“Ferrous scrap prices declined in eight of the past 12 months during 2019, resulting in our metals recycling operations earning $28 million in 2019 compared to $88 million [in 2018],” comments Mark D. Millett, president and CEO of SDI. The company’s metal recycling operations includes the OmniSource network of scrap processing and brokerage locations.

“Even though 2019 was one of our best years, it was challenged with high customer steel inventories, as many customers purchased beyond normal demand levels in 2018,” Millett says. “Domestic steel demand remained steady in 2019, but as customers began to destock inventories, steel prices declined throughout the year.”

Regarding 2020, he comments, “Looking ahead, steel customer inventory levels have moderated, and underlying domestic steel demand remains intact for the primary steel consuming sectors, including automotive and construction. Customers have been positive concerning the business outlook for 2020.”